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A general downturn

14th May 2009, Page 22
14th May 2009
Page 22
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Page 22, 14th May 2009 — A general downturn
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Which of the following most accurately describes the problem?

These are worrying times for general haulage as companies battle for survival. However, CM discovers there are a few firms that are proving exceptions to the rules of recession.

Words: Lindsay Clark

AFTER 93 YEARS IN business, gen:ral haulier WJ Clayton shut up shop in 3outh Wales last month in yet another vorrying sign of the ravages of reces;ion on the road transport industry The Newport business was unable to ;ustain its volumes after a key customer )ulled out of the area. The company is mining a retirement auction on 16 May, vhich director Richard Clayton says viii allow it to leave the sector in a irofitable position rather than leave a rail of bad debts.

"It's a hard industry for general taufiers; we are a dying breed," he says. 'It's time to get out while we are ahead. ve could carry on now, but in six months' ime, it's likely we'd be at a loss.

"There's not much work in general taulage, but it's expensive to keep up rayments such as staff, land and fuel or the 29 HGVs. Many in the sector viii be forced to pack up and many vill go to the wall. We want to get out vith our heads high."

Winding down

bllowi lig a 90-day consultation, VI Clayton's key customer, aluminium ecycling group Novelis, is closing its .epot in South Wales. The contract, ccording to Clayton, accounted for 0% of his business The family run haulier has already lade 10 redundancies this year, and 30 more will be made as it winds down before the auction, which will be run by Malcolm Harrison Auctions at the WJ Clayton yard.

Difficult trading

It is not only small general hauliers that are suffering. Suttons Group, which has an £80m annual turnover in its worldwide operations, pulled out of general haulage in November 2008.

Despite the firm's size, it said "difficult trading" made the general haulage market undesirable.

Suttons Transport group managing director Andrew Palmer says the firm left the market because it was very different to the rest of its business.

"We mainly deal in bulk tankers. The general haulage business in St Helens was a single site, and for the past five to 10 years, was in decline. It was a mixture of non-food items so we decided to focus on other activities."

Palmer says general haulage is very difficult unless a haulage firm operates from a number of locations and has got the scale to develop efficiencies.

"Alternatively," he says, "you can develop a specific niche like Wincanton, which moved into containers. Stobart has got the scale in general haulage, but it isn't an attractive market for us."

Instead of fighting its corner in the general haulage market, Suttons Group has opted to invest in its international tanker business.

"When you specialise in some activities that are difficult to do, you bring expertise to handle things economically and safely," he says.

He goes on to state that it was difficult to charge a premium for these specialist services in the current economic climate.

However, the market for general haulage is even more difficult to maintain any business growth.

"General haulage is very easy to get into," Palmer says. "You just need a licence and to rent some vehicles and space. But it is very tough to sustain to make a reasonable return. It is not impossible, but you have to have the specialism or the economies of scale."

Success stories

Despite the difficulties in general haulage, some firms are making a success of it. Last month, Braintree, Essex-based haulier Steve Prince Transport added two Renault Premium 450.25s to its 28-strong mixed fleet of Volvo, Scania and Iveco HGVs.

The general haulage business decided to buy the two tractor units to meet demand. which, according to transport manager Ron Prince, -is the busiest it has ever been" despite the recession.

Steve Prince Transport director Steve Prince says smart use of pallet networks, intense customer focus and maintaining a large and varied customer portfolio were likely to help firms make a success of general haulage.

worked with a small number of customers a few years ago and I'll never do that again," Prince says. "The pallet networks help and we have a good spread of customers. There are 350 on our books and 120 live at any one time. There's also a complete range of vehicles. We give the service and people notice. Particularly at this time of year, the competition is trying to undercut you all the time. Some customers do go, but a few come back because they notice the service."

Although the business has been affected by the recession, it is not suffering as much as some. "I can't say it's good because it's not," Prince says. "Everyone is suffering, but we're keeping busy."

Another factor in maintaining volume and margins is good communication among management. "We're a family business, we all know what everybody is doing and all think alike."

At the other end of the scale, general haulage heavyweight Stobart Group continues to expand. Passing on fuel duty increases and an innovative business model (see box) have helped bolster the firm's expansion, says Mark Dichlian, analyst at investment advisors Edison.

A large fleet

Only with a large fleet and multiple locations can an operator maintain such a business model. "Stobart carries for Tesco and Proctor & Gamble — it is gaining market share because there are cost savings. They will gain in the recession. But you can only really offer this model if you have critical mass. If you have 20 lorries, then it won't work," Dichlian says.

With the recession driving smaller players out of business and pushing rates down, consolidation is likely to be tile within the general haulage arena, Dichlian says. And Stobart's recent strong results are likely to offer the concrete evidence for this trend. •

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